nep-tra New Economics Papers
on Transition Economics
Issue of 2010‒06‒26
thirteen papers chosen by
J. David Brown
Heriot-Watt University

  1. Post-Manichean Economics: Foreign Investment, State Capacity and Economic Development in Transition Economies By Patrick Hamm; Lawrence King
  2. The Role of Intermediaries in Facilitating Trade By Jaebin Ahn; Amit K. Khandelwal; Shang-Jin Wei
  3. Quantity-Quality and the One Child Policy: The Only-Child Disadvantage in School Enrollment in Rural China By Nancy Qian
  4. Financial Dollarization and European Union Membership By Kyriakos C. Neanidis
  5. Trusting Only Whom You Know, Knowing Only Whom You Trust: The Joint Impact of Social Capital and Trust on Individuals' Economic Performance and Well-Being in CEE Countries By Growiec, Katarzyna; Growiec, Jakub
  6. How Would an Appreciation of the Yuan Affect the People's Republic of China's Surplus in Processing Trade? By Thorbecke, Willem
  7. Inequality in Vietnamese Urban-Rural Living Standards, 1993-2006 By Le, Huong Thu; Booth, Alison L.
  8. Food Standards and Welfare: A General Equilibrium Model with Market Imperfections By Tao Xiang; Jikun Huang; d’Artis Kancs; Scott Rozelle; Jo Swinnen
  9. Understanding Vietnam: A Look Beyond Facts and Figures By Tamara Trinh
  10. Exporting, Productivity and Government Interventions: Is There a Link? By Elena Besedina
  11. Measuring and Analyzing Income Distribution and Income Inequality in Hungary based on Data from Personal Income Tax Returns By Ilona Kovacs
  12. Do Consumer Price Subsidies Really Improve Nutrition? By Robert T. Jensen; Nolan H. Miller
  13. Pro-Poor Growth, Poverty and Inequality in Rural Vietnam By Woojin Kang; Katsushi Imai

  1. By: Patrick Hamm; Lawrence King
    Abstract: This paper evaluates the role of foreign direct investment (FDI) in the transition from socialism to capitalism. Fixed-effects panel regressions indicate that FDI and domestic investment have an equal effect on growth in the first year of investment, but over time FDI is associated with greater growth than domestic investment. However, this positive impact of FDI turns out to be contingent upon the presence of a relatively well-functioning state in the host economy; in the absence of such a state, the net effect of FDI on economic development may be negative. All findings are robust in light of instrumental variable estimation, which is used to account for potential endogeneity problems.
    Date: 2010
  2. By: Jaebin Ahn; Amit K. Khandelwal; Shang-Jin Wei
    Abstract: They are providing systematic evidence that intermediaries play an important role in facilitating trade using a firm-level the census of China's exports. Intermediaries account for around 20% of China's exports in 2005. This implies that many firms engage in trade without directly exporting products. We modify a heterogeneous firm model so that firms endogenously select their mode of export--either directly or indirectly through an intermediary. The model predicts that intermediaries will be relatively more important in markets that are more difficult to penetrate. They also provide empirical confirmation for this prediction, and generate new facts regarding the activity of intermediaries.[Working Paper No. 255]
    Keywords: China, Intermediaries, Heterogeneous Firms, Middlemen, Trade Costs
    Date: 2010
  3. By: Nancy Qian
    Abstract: Many believe that increasing the quantity of children will lead to a decrease in their quality. This paper exploits plausibly exogenous changes in family size caused by relax- actions in China's One Child Policy to estimate the causal effect of family size on school enrollment of the …first child. The results show that for one-child families, an additional child signi…ficantly increased school enrollment of …first-born children by approximately 16 percentage-points. The effect is larger for households where the children are of the same sex, which is consistent with the existence of economies of scale in schooling costs.[Working Paper No. 228]
    Keywords: Education, Development, Family Planning
    Date: 2010
  4. By: Kyriakos C. Neanidis
    Abstract: We analyze the effect of European Union (EU) membership on financial dollarization for the Central and Eastern European countries. Using a unique monthly dataset that spans about two decades, we find that both the accession process toward EU membership and EU entry have a direct impact on deposit and loan dollarization. EU membership reduces deposit dollarization while it increases loan dollarization. The negative effect on deposit dollarization captures the increased confidence of the private sector in the domestic currency as they consider the EU admission process to reflect their government’s commitment in promoting policies of long-run currency stability. The positive impact on credit dollarization is the outcome of a greater convergence of exchange rates to the euro and the subsequent anticipation for a lower currency risk, which diminishes the cost of foreign currency borrowing.
    Date: 2010
  5. By: Growiec, Katarzyna; Growiec, Jakub
    Abstract: This paper provides evidence that bridging and bonding social capital as well as social trust may interdependently affect individuals' earnings and subjective well-being. Based on cross-sectional World Values Survey 2000 data on individuals from Central and Eastern European countries (CEECs), we show that majority of citizens of these countries seem to fall in a "low trust trap" where deficits of bridging social capital and trust reinforce each other in lowering individuals' incomes and well-being. Apart from gradual modernization and economic growth, also increases in labor market participation can be perceived as a potential way out of this "trap", because employed people in CEECs tend to have statistically significantly more bridging social capital and more trust. We discuss our empirical results by providing an assessment of their robustness, and pointing out the high risk of endogeneity and omitted variables bias, often overlooked in earlier studies.
    Keywords: bridging social capital; bonding social capital; social trust; CEE countries; earnings; subjective well-being
    JEL: D10 J20
    Date: 2010–06–17
  6. By: Thorbecke, Willem (Asian Development Bank Institute)
    Abstract: Enormous trade surpluses are problematic for the People's Republic of China (PRC) and the rest of the world. They primarily stem from processing trade. This paper investigates how exchange rate changes would affect the PRC's imports for processing and processed exports. The results indicate that an appreciation throughout East Asian supply chain countries would reduce the PRC's surplus in processing trade, while an appreciation of the yuan alone might not. Even for an appreciation throughout East Asia, however, the sum of the exchange rate elasticities is not large. Thus, to rebalance the PRC's trade, exchange rate appreciations must be accompanied by other changes such as factor market liberalization and greater enforcement of environmental regulations.
    Keywords: global imbalances; exchange rate elasticities; yuan affect prc surplus; surplus processing trade
    JEL: F32 F41
    Date: 2010–06–18
  7. By: Le, Huong Thu (Australian National University); Booth, Alison L. (University of Essex)
    Abstract: Using data from five waves of the Vietnam Household Living Standard Survey, we find evidence of significant urban-rural expenditure inequality. Urban-rural inequality in Vietnam increased dramatically from 1993 to 1998, and peaked in 2002 before reducing slightly in 2004, and significantly in 2006. The urban-rural gap also monotonically increases across the expenditure distribution. We use a variant of the Oaxaca-Blinder decomposition method, applied to the unconditional quantile regression method of Firpo, Fortin and Lemieux (2009), to explain the components of the per capita expenditure differentials between urban and rural households at selected quantiles of the distribution. We also compare these estimates with those at mean obtained by OLS. Our results show a number of factors contributing significantly to the high urban-rural gap. These include inter-group differences in education, household demographic structure, industrial structure and their related returns. Adjusting the average characteristics of rural households to those of urban households will reduce about a half of the overall urban-rural expenditure gap. A significant part of the remaining unexplained component lies in the intercept differences; that is, the inter-group differences in other factors not captured in the model that favor urban households.
    Keywords: urban-rural inequality, Vietnam, unconditional quantile regression, Oaxaca decomposition
    JEL: O18 O53 C13
    Date: 2010–06
  8. By: Tao Xiang; Jikun Huang; d’Artis Kancs; Scott Rozelle; Jo Swinnen
    Abstract: We analyze the effects of high standards food chains on household welfare taking into account general equilibrium effects and market imperfections. To measure structural production changes and welfare effects on rural and urban households, our model has two types of agents, five kinds of products and four types of factors. We calibrate the model using dataset from China. The simulation results show that how poor rural households are affected depends on a variety of factors, including the nature of the shocks leading to the expansion of high standards sector, production technologies, trade effects, spillover effects on low standards markets, market imperfections, and labor market effects.
    JEL: J11 J15 Y80
    Date: 2010
  9. By: Tamara Trinh
    Abstract: Vietnam's (re) discovery in recent years by the international investor community gives the country a second chance to become and Asia tiger. The article looks into the economic, social, political, performance of the country.
    Keywords: china, vietnam, tourism, infrastructure and the banking sector, capital markets, education, diaspora, investments, foreign markets, tourism, IT sourcing, international, investor, Asia, community, India,
    Date: 2010
  10. By: Elena Besedina (Kyiv School of Economics, Kyiv Economic Institute)
    Abstract: Recent theoretical models postulate that only the most productive firms become exporters due to the existence of costs of exporting. Empirical evidence does suggest that exporters are on average more productive than their domestic counterparts. However, contrary to the theory the productivity distribution for exporters and non-exporters overlaps. Motivated by this empirical finding, I extend an existing model of heterogeneous firms by adding endogenous trade policy based on a political economy argument. Using Ukrainian data I identify firms that receive explicit government support in the form of preferential tax policy, subsidies and other exclusive benefits. I find that explicit political support is positively associated with firms’ size, voter turnout and state ownership but not efficiency.
    Keywords: TFP, Exporting, Subsidy, Electoral Competition
    JEL: D24 D72 P26
    Date: 2010–06
  11. By: Ilona Kovacs (Institute of Economics - Hungarian Academy of Sciences)
    Abstract: This study surveys various views on income distribution and income inequality and presents alternative approaches to and analytical methods of measuring income inequality. In contrast to traditional income distribution analyses, the author examines the development of income distribution and income inequality for a period between 1996 and 2004, following the change in the regime, based on personal income (consolidated income subject to general tax rates and total income including income subject to separate tax rates) declared to the Hungarian Tax and Financial Control Administration (APEH). A follow-up to this work based on similar data available up to the year 2007 is forthcoming. Based on income surveys by the Hungarian Central Statistical Office (KSH), the ratio of the income of the top tenth of the population to the bottom tenth of the population doubled from 4.6 to 9.2 between 1987 and 1997. Analyses for years following 1996 (TµRKI, Institute of Economics) show that income inequality did not increase considerably following that year; it essentially stagnated with nothing more than internal structural changes taking place. The results obtained based on data from personal income tax returns contradict these findings, as income inequality has further increased since, while the extent of income inequality itself was also considerably larger. Based on her conclusions, the author formulates important economic policy recommendations. She sees taxation, inflation, demographic changes, and changes in the structure of ownership and the way privatization took place as the leading causes behind these changes in income distribution and income inequality which were extensive by international standards.
    Keywords: income distribution, income inequalities
    JEL: D31
    Date: 2010–04
  12. By: Robert T. Jensen; Nolan H. Miller
    Abstract: Many developing countries use food-price subsidies or price controls to improve the nutrition of the poor. However, subsidizing goods on which households spend a high proportion of their budget can create large wealth effects. Consumers may then substitute towards foods with higher non-nutritional attributes (e.g., taste), but lower nutritional content per unit of currency, weakening or perhaps even reversing the intended impact of the subsidy. We analyze data from a randomized program of large price subsidies for poor households in two provinces of China and find no evidence that the subsidies improved nutrition. In fact, it may have had a negative impact for some households.
    JEL: I38 O12 Q18
    Date: 2010–06
  13. By: Woojin Kang; Katsushi Imai
    Date: 2010

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